Item 6. SELECTED FINANCIAL DATA.

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Item 6. SELECTED FINANCIAL DATA.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

QUARTERLY FINANCIAL DATA

(UNAUDITED)

The following selected consolidated financial data is derived from our Consolidated Financial Statements. This data should be read in conjunction with the Consolidated Financial Statements and Notes thereto, and with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.



	Fiscal Year Ended December 31, 2019
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total Year
Net Sales	$	1,297,402	$	1,291,568	$	1,267,345	$	1,283,769	$	5,140,084
Gross Profit(a)	531,259		546,239		533,088		502,162		2,112,748
Income before taxes	134,576		169,481		156,866		96,529		557,452
Net income	111,214		138,869		129,807		80,378		460,268
Net income attributable to IFF stockholders(b)	108,829		136,377		127,124		83,543		455,873
Net income per share — basic(d)	0.97		1.21		1.15		0.71		4.05
Net income per share — diluted(c)	0.96		1.20		1.13		0.70		4.00



	Fiscal Year Ended December 31, 2018
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total Year
Net Sales	$	930,928	$	920,016	$	907,548	$	1,219,047	$	3,977,539
Gross Profit(a)	405,809		398,717		400,666		477,515		1,682,707
Income before taxes	158,837		121,918		100,702		66,300		447,757
Net income	129,416		99,149		95,716		15,500		339,781
Net income attributable to IFF stockholders(b)	129,416		99,149		95,716		13,021		337,302
Net income per share — basic(d)	1.63		1.25		1.18		0.09		3.81
Net income per share — diluted(c)(e)	1.63		1.25		1.17		0.09		3.79

** See the following chart for (a)-(e) footnote explanations.*

Included in the above quarterly results are the following:



	Footnotes
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	Gross Profit (a)			Net Expense (Income) (b)			Diluted EPS (c)			Description
Q1 2019
Integration Related Costs	$	156		$	11,548		$	0.10		Represents costs related to the integration of the Frutarom acquisition.
Restructuring and Other Charges, net	—			12,143			0.11			Represents severance costs related to restructuring programs.
Frutarom Acquisition Related Costs	7,850			7,999			0.07			Represents transaction-related costs and expenses related to the acquisition of Frutarom.
Q2 2019
Integration Related Costs	165			8,843			0.08			Represents costs related to the integration of the Frutarom acquisition.
Restructuring and Other Charges, net	—			1,973			0.02			Represents severance costs related primarily to Frutarom.
Frutarom Acquisition Related Costs	—			(1,290		)	(0.01		)	Represents reductions in the contingent consideration payable related to certain acquisitions made by Frutarom.
Q3 2019
Integration Related Costs	187			8,164			0.07			Represents costs related to the integration of the Frutarom acquisition.
Restructuring and Other Charges, net	—			2,905			0.03			Represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Program.
Frutarom Acquisition Related Costs	(3,603		)	(2,199		)	(0.02		)	Represents a measurement period adjustment to the amount of the inventory "step-up" recorded.
Q4 2019
Integration Related Costs	222			14,144			0.12			Represents costs related to the integration of the Frutarom acquisition.
Restructuring and Other Charges, net	—			5,947			0.05			Represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Program.
Frutarom Acquisition Related Costs	—			636			0.01			Represents costs primarily compensation associated with Frutarom options that had not vested at the time the Frutarom acquisition closed.
N&B Transaction Related Costs	—			18,393			0.16			Represents costs and expenses related to the pending transaction with Nutrition & Biosciences Inc.
Q1 2018
Restructuring and Other Charges, net	—			548			0.01			Represents severance costs related to the 2017 Productivity Program and Taiwan lab closure.
U.S. Tax Reform	—			649			0.01			Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017.
Q2 2018
Integration Related Costs	—			993			0.01			Represents costs related to the integration of David Michael.
Restructuring and Other Charges, net	—			147			—			Represents severance costs related to the 2017 Productivity Program.
Frutarom Acquisition Related Costs	—			30,446			0.38			Represents transaction-related costs and expenses related to the acquisition of Frutarom.
Q3 2018
Integration Related Costs	18			722			0.01			Represents costs related to the integration of Frutarom.
Restructuring and Other Charges, net	—			699			0.01			Represents severance costs related to the 2017 Productivity Program.
U.S. Tax Reform	—			(8,151		)	(0.10		)	Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017.
Frutarom Acquisition Related Costs	—			45,433			0.56			Represents transaction-related costs and expenses related to the acquisition of Frutarom.
Q4 2018
Integration Related Costs	84			4,076			0.04			Represents costs related to the integration of the Frutarom acquisition.
Restructuring and Other Charges, net	—			1,672			0.01			Represents severance costs related to the 2017 Productivity Program and costs associated with the termination of agent relationships in a subsidiary.
U.S. Tax Reform	—			32,847			0.30			Represents additional expense based on updated repatriation plans requiring accruals for withholding taxes on deemed repatriation.
Frutarom Acquisition Related Costs	23,550			51,200			0.46			Represents transaction-related costs and expenses related to the acquisition of Frutarom.


(d)	The sum of Net Income per basic share by quarter does not equal the earnings per share for the full year due to the impact of higher shares in the third and fourth quarters.


(e)	The sum of Net Income per diluted share by quarter does not equal the earnings per share for the full year due to rounding.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

FIVE-YEAR SUMMARY

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)



	Year Ended December 31,
	2019(a)			2018(b)			2017(k)			2016(k)			2015(k)
Consolidated Statement of Income Data
Net sales	$	5,140,084		$	3,977,539		$	3,398,719		$	3,116,350		$	3,023,189
Cost of goods sold(c)	3,027,336			2,294,832			1,926,256			1,720,787			1,672,308
Gross profit	2,112,748			1,682,707			1,472,463			1,395,563			1,350,881
Research and development expenses	346,128			311,583			295,469			258,863			245,605
Selling and administrative expenses(d)	876,121			707,461			570,144			572,518			494,097
Restructuring and other charges, net(e)	29,765			5,079			19,711			(1,700		)	7,594
Amortization of acquisition-related intangibles	193,097			75,879			34,693			23,763			15,040
Losses (gains) on sale of assets	2,367			(1,177		)	(184		)	(10,836		)	—
Operating profit	665,270			583,882			552,630			552,955			588,545
Interest expense	138,221			132,558			65,363			52,989			46,062
Loss on extinguishment of debt(f)	—			38,810			—			—			—
Other (income) expense, net(g)	(30,403		)	(35,243		)	(49,778		)	(23,751		)	3,382
Income before taxes	557,452			447,757			537,045			523,717			539,101
Taxes on income(h)	97,184			107,976			241,380			118,686			119,854
Net income	460,268			339,781			295,665			405,031			419,247
Net income attributable to noncontrolling interests	4,395			2,479			—			—			—
Net income attributable to IFF stockholders	$	455,873		$	337,302		$	295,665		$	405,031		$	419,247
Percentage of net sales	9.0			8.5			8.7			13.0			13.9
Percentage of average shareholders’ equity(i)	7.4			8.7			17.8			25.1			26.9
Net income per share — basic	$	4.05		$	3.81		$	3.73		$	5.07		$	5.19
Net income per share — diluted	$	4.00		$	3.79		$	3.72		$	5.05		$	5.16
Average number of diluted shares (thousands)	113,307			88,121			79,370			79,981			80,891
Consolidated Balance Sheet Data
Cash and cash equivalents	$	606,823		$	634,897		$	368,046		$	323,992		$	181,988
Receivables, net	876,197			937,765			663,663			550,658			537,896
Inventories	1,123,068			1,078,537			649,448			592,017			572,047
Property, plant and equipment, net	1,386,920			1,241,152			880,580			775,716			732,794
Goodwill and intangible assets, net(j)	8,349,531			8,417,710			1,572,075			1,365,906			1,247,393
Total assets	13,287,411			12,889,395			4,598,926			4,016,984			3,702,010
Bank borrowings, overdrafts and current portion of long-term debt	384,958			48,642			6,966			258,516			132,349
Long-term debt	3,997,438			4,504,417			1,632,186			1,066,855			935,373
Redeemable noncontrolling interests	99,043			81,806			—			—			—
Total Shareholders’ equity	6,229,548			6,043,374			1,689,294			1,631,134			1,594,989
Other Data
Current ratio	1.9			2.6			2.5			1.8			2.0
Additions to property, plant and equipment	$	235,978		$	170,094		$	128,973		$	126,412		$	101,030
Depreciation and amortization expense	323,330			173,792			117,967			102,469			89,597
Cash dividends declared per share	$	2.96		$	2.84		$	2.66		$	2.40		$	2.06
Number of shareholders of record at year-end	1,555			1,276			1,735			1,892			2,013
Number of employees at year-end	13,668			13,209			7,299			6,932			6,732


(a)	Results for the year ended 2019 include a full year of Frutarom’s business operations.


(b)	Results for the year ended 2018 include Frutarom’s business operations since the acquisition date of October 4, 2018.


(c)	The 2018 amount includes $23.6 million related to amortization for inventory "step-up" costs for the Frutarom acquisition and $7.1 million of net reimbursements from suppliers related to the previously disclosed FDA mandated recall. The 2017 amount includes $15.9 million of costs related to the amortization for inventory "step-up" for the Fragrance Resources and PowderPure acquisitions and FDA mandated product recall costs of $11.0 million. The 2016 amount includes $7.6 million of costs related to the amortization for inventory "step-up" for the David Michael and Lucas Meyer acquisitions. The 2015 amount includes $6.8 million of costs related to the fair value step-up of inventory for the Ottens Flavors and Lucas Meyer acquisitions.

(c)

The 2018 amount includes $23.6 million related to amortization for inventory "step-up" costs for the Frutarom acquisition and $7.1 million of net reimbursements from suppliers related to the previously disclosed FDA mandated recall**.** The 2017 amount includes $15.9 million of costs related to the amortization for inventory "step-up" for the Fragrance Resources and PowderPure acquisitions and FDA mandated product recall costs of $11.0 million. The 2016 amount includes $7.6 million of costs related to the amortization for inventory "step-up" for the David Michael and Lucas Meyer acquisitions. The 2015 amount includes $6.8 million of costs related to the fair value step-up of inventory for the Ottens Flavors and Lucas Meyer acquisitions.


(d)	The 2019 amount includes $53.5 million of integration related costs, $20.7 million of N&B transaction related costs, $11.3 million compliance review and legal defense costs offset by $8.0 million related to certain Brazil tax credits. The 2018 amount includes $66.1 million of transaction costs related to acquisition of Frutarom, $6.1 million of integration costs related to the David Michael and Frutarom acquisitions, and $1.3 million of transaction costs related to the acquisitions of Fragrance Resources and PowderPure. The 2017 amount includes $4.5 million of costs related to the Fragrance Resources and PowderPure acquisitions, $3.3 million of integration costs related to the 2017 Productivity Program and $5.3 million of reserve for payment of a tax assessment related to commercial rent for prior periods. The 2016 amount includes $48.5 million of legal charges/credits principally related to litigation accrual and $4.5 million of acquisition-related costs related to the acquisitions of Lucas Meyer, David Michael and Fragrance Resources. The 2015 amount includes $10.5 million of reversal of the previously recorded provision for the Spanish capital tax case, $7.2 million of expense for the acceleration of the contingent consideration payments related to the Aromor acquisition and $11.5 million of acquisition-related costs for the Ottens and Lucas Meyer acquisitions.

(d)

The 2019 amount includes $53.5 million of integration related costs, $20.7 million of N&B transaction related costs, $11.3 million compliance review and legal defense costs offset by $8.0 million related to certain Brazil tax credits. The 2018 amount includes $66.1 million of transaction costs related to acquisition of Frutarom, $6.1 million of integration costs related to the David Michael and Frutarom acquisitions, and $1.3 million of transaction costs related to the acquisitions of Fragrance Resources and PowderPure**.** The 2017 amount includes $4.5 million of costs related to the Fragrance Resources and PowderPure acquisitions, $3.3 million of integration costs related to the 2017 Productivity Program and $5.3 million of reserve for payment of a tax assessment related to commercial rent for prior periods. The 2016 amount includes $48.5 million of legal charges/credits principally related to litigation accrual and $4.5 million of acquisition-related costs related to the acquisitions of Lucas Meyer, David Michael and Fragrance Resources. The 2015 amount includes $10.5 million of reversal of the previously recorded provision for the Spanish capital tax case, $7.2 million of expense for the acceleration of the contingent consideration payments related to the Aromor acquisition and $11.5 million of acquisition-related costs for the Ottens and Lucas Meyer acquisitions.


(e)	The 2019 amount represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Program. The 2018 and 2017 amounts primarily represent severance costs related to the 2017 Productivity Program. The 2016 amount represents accelerated depreciation related to the termination of a former executive officer and partial reversal of restructuring accruals recorded in the prior year.

(e)

The 2019 amount represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Program. The 2018 and 2017 amounts primarily represent severance costs related to the 2017 Productivity Program. The 2016 amount represents accelerated depreciation related to the termination of a former executive officer and partial reversal of restructuring accruals recorded in the prior year.


(f)	For 2018, represents a $34.9 million make whole payment on the Senior Notes - 2007 and a $3.9 million realized loss on the termination of a fair value hedge in connection with the acquisition financing of Frutarom.


(g)	The 2017 amount includes $12.2 million from the release of CTA related to the liquidation of a foreign entity.


(h)	The 2018 amount includes an additional charge based on updated repatriation plans requiring a $32.8 million accrual of a deferred tax liability for foreign withholding and other taxes, including state taxes, on deemed repatriation. For 2017, represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017, including $38.6 million related to net adjustments on deferred tax assets, and $100.6 million related to taxes on deemed repatriation of earnings. The 2015 amount includes $10.5 million of settlements due to favorable tax rulings in jurisdictions for which reserves were previously recorded for ongoing tax disputes.

(h)

The 2018 amount includes an additional charge based on updated repatriation plans requiring a $32.8 million accrual of a deferred tax liability for foreign withholding and other taxes, including state taxes, on deemed repatriation. For 2017, represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017, including $38.6 million related to net adjustments on deferred tax assets, and $100.6 million related to taxes on deemed repatriation of earnings. The 2015 amount includes $10.5 million of settlements due to favorable tax rulings in jurisdictions for which reserves were previously recorded for ongoing tax disputes.


(i)	Percentage of average shareholders’ equity is calculated using the Net income attributable to IFF stockholders as a percent of the average of Total Shareholders’ equity balance at the end of year and the preceding year.


(j)	Beginning in 2018, the amount includes $6.9 billion in identifiable intangible assets and goodwill related to our acquisition of Frutarom.


(k)	The amounts have been adjusted to reflect the adoption of ASU 2017-07, which required that employers who present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and postretirement costs in operating expenses. The impact of the adoption of this standard was a decrease in operating profit by approximately $28.8 million, $14.4 million and $0.6 million for the fiscal year 2017, 2016 and 2015, respectively, and corresponding increases in Other (income) expense, net.

(k)

The amounts have been adjusted to reflect the adoption of ASU 2017-07, which required that employers who present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and postretirement costs in operating expenses. The impact of the adoption of this standard was a decrease in operating profit by approximately $28.8 million, $14.4 million and $0.6 million for the fiscal year 2017, 2016 and 2015, respectively, and corresponding increases in Other (income) expense, net.

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